Magazine article Global Finance

Corporate Bond Issuance Breaks Records

Magazine article Global Finance

Corporate Bond Issuance Breaks Records

Article excerpt

Issuance of high-grade corporate bonds in the US market soared to a monthly record high of $99 billion in February, according to Dealogic, while high-yield debt placements and public offerings also climbed to near-record highs. Still, the new issuance may not be enough to satisfy growing investor demand for corporate debt, which provides a higher return than US Treasury securities.

The stampede to issue bonds continued into early March, as companies rushed to take advantage of low interest rates and narrow spreads, amid signs of an improving US economy. March 5 set a record high for total bond issuance in a single day of $24.7 billion, including high-grade, highyield and covered bonds.

Despite the heavy issuance, there are not enough corporate bonds to meet investor demand, because the amount of securities that have matured this year is greater than the amount of new issues that have come to market, according to a report by Citi analysts in London. Inflows into bond funds are the highest in two years, according to the report.

NOT ENOUGH PAPER

"The real story is that there simply is not enough paper around to satisfy real money demand," Citi credit analyst Hans Lorenzen wrote in the report. "Against such a skewed supply-demand balance, it will take a lot of bad news to prevent spreads from tightening further. An expanding pool of money seeking a shrinking investable universe does suggest the market could be more resilient than people give it credit for in their lack of fundamental conviction," he says. …

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